TY - JOUR
AU - Bhattarai,Keshab
AU - Whalley,John
TI - The Redistributive Effects of Transfers
JF - National Bureau of Economic Research Working Paper Series
VL - No. 6281
PY - 1997
Y2 - November 1997
DO - 10.3386/w6281
UR - http://www.nber.org/papers/w6281
L1 - http://www.nber.org/papers/w6281.pdf
N1 - Author contact info:
Keshab Bhattarai
E-Mail: K.R.Bhattarai@hull.ac.uk
John Whalley
Department of Economics
Social Science Centre
Western University
London, ON N6A 5C2
CANADA
Tel: 519/661-3509
Fax: 519/661-3666
E-Mail: jwhalley@uwo.ca
AB - Existing literature assessing the impacts of transfers on low income households assumes that transfer program participants benefit by the full amount of cash transfers received. We argue that because tax-back arrangements accompany such transfer programmes, and endogenous participantion decisions (regime choices) are involved, a money-metric measure of the utility generated by transfers will typically be substantially less than the cash value of transfers received. We use a conditional choice general equilibrium model of the UK, calibrated to literature based labor supply and labor demand elasticities, with a leisure-consumption choice for household and production involving heterogeneous labor inputs. In the model households face non-convex budgets set due to differences in tax rates and tax-back schemes in transfer programmes. Household demands for leisure and consumption goods are evaluated numerically using optimization techniques within a larger equilibrium structure including the production side of the economy since demand are non-analytic. Model results suggest that a money-metric measure of the utility equivalent of transfers received by the bottom deciles of UK households in the early 1990s was only 32 percent of cash transfers received due to the conditionality in these programmes.
ER -